{"id":27272,"date":"2021-02-24T09:46:41","date_gmt":"2021-02-24T14:46:41","guid":{"rendered":"https:\/\/www.affiliated1031.com\/use-the-3-property-rule-to-create-more-options-in-a-1031-exchange\/"},"modified":"2023-04-28T11:21:51","modified_gmt":"2023-04-28T15:21:51","slug":"use-the-3-property-rule-to-create-more-options-in-a-1031-exchange","status":"publish","type":"post","link":"https:\/\/www.affiliated1031.com\/es\/use-the-3-property-rule-to-create-more-options-in-a-1031-exchange\/","title":{"rendered":"Use the 3 Property Rule to Create More Options in a 1031 Exchange"},"content":{"rendered":"<div  class=\"tatsu-hdeup74wh81w6kol tatsu-section  tatsu-bg-overlay   tatsu-clearfix\" data-title=\"\"  data-headerscheme=\"background--dark\"><div class='tatsu-section-pad clearfix' data-padding='{\"d\":\"15px 0px 15px 0px\"}' data-padding-top='15px'><div class=\"tatsu-row-wrap  tatsu-wrap tatsu-row-one-col tatsu-row-has-one-cols tatsu-medium-gutter tatsu-reg-cols  tatsu-clearfix tatsu-hdeup74wif486o35\" ><div  class=\"tatsu-row \" ><div  class=\"tatsu-column  tatsu-bg-overlay tatsu-one-col tatsu-column-image-none tatsu-column-effect-none  tatsu-hdeup74wjh6i4g28\"  data-parallax-speed=\"0\" style=\"\"><div class=\"tatsu-column-inner \" ><div class=\"tatsu-column-pad-wrap\"><div class=\"tatsu-column-pad\" ><div  class=\"tatsu-module tatsu-text-block-wrap tatsu-hdeup74wkec35o6r  \"><div class=\"tatsu-text-inner tatsu-align-center  clearfix\" ><style>.tatsu-hdeup74wkec35o6r.tatsu-text-block-wrap .tatsu-text-inner{width: 100%;text-align: left;}<\/style><p>\n<\/div><\/div><\/div><\/div><div class = \"tatsu-column-bg-image-wrap\"><div class = \"tatsu-column-bg-image tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-column-overlay tatsu-animate-none\" ><\/div><\/div><style>.tatsu-row > .tatsu-hdeup74wjh6i4g28.tatsu-column{width: 100%;}.tatsu-hdeup74wjh6i4g28.tatsu-column > .tatsu-column-inner > .tatsu-column-overlay{mix-blend-mode: normal;}.tatsu-hdeup74wjh6i4g28 > .tatsu-column-inner > .tatsu-top-divider{z-index: 9999;}.tatsu-hdeup74wjh6i4g28 > .tatsu-column-inner > .tatsu-bottom-divider{z-index: 9999;}.tatsu-hdeup74wjh6i4g28 > .tatsu-column-inner > .tatsu-left-divider{z-index: 9999;}.tatsu-hdeup74wjh6i4g28 > .tatsu-column-inner > .tatsu-right-divider{z-index: 9999;}<\/style><\/div><\/div><\/div><\/div><div class=\"tatsu-section-background-wrap\"><div class = \"tatsu-section-background tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-section-overlay\"><\/div><style>.tatsu-hdeup74wh81w6kol .tatsu-section-pad{padding: 15px 0px 15px 0px;}.tatsu-hdeup74wh81w6kol > .tatsu-bottom-divider{z-index: 9999;}.tatsu-hdeup74wh81w6kol > .tatsu-top-divider{z-index: 9999;}.tatsu-hdeup74wh81w6kol .tatsu-section-overlay{mix-blend-mode: normal;}<\/style><\/div><div  class=\"tatsu-h6ussszzoc8j0qfs tatsu-section  tatsu-bg-overlay   tatsu-clearfix\" data-title=\"\"  data-headerscheme=\"background--dark\"><div class='tatsu-section-pad clearfix' data-padding='{\"d\":\"15px 0px 15px 0px\"}' data-padding-top='15px'><div class=\"tatsu-row-wrap  tatsu-wrap tatsu-row-one-col tatsu-row-has-one-cols tatsu-medium-gutter tatsu-reg-cols  tatsu-clearfix tatsu-h6ussszzr3g2wdc7\" ><div  class=\"tatsu-row \" ><div  class=\"tatsu-column  tatsu-bg-overlay tatsu-one-col tatsu-column-image-none tatsu-column-effect-none  tatsu-h6ussszzti6lzj0s\"  data-parallax-speed=\"0\" style=\"\"><div class=\"tatsu-column-inner \" ><div class=\"tatsu-column-pad-wrap\"><div class=\"tatsu-column-pad\" ><div  class=\"tatsu-module tatsu-text-block-wrap tatsu-h6ussszzwc1bg3qr  \"><div class=\"tatsu-text-inner tatsu-align-center  clearfix\" ><style>.tatsu-h6ussszzwc1bg3qr.tatsu-text-block-wrap .tatsu-text-inner{width: 100%;text-align: left;}<\/style><p><\/p>\n<p>Most of you are aware that the taxpayer\/exchanger has <a href=\"https:\/\/www.affiliated1031.com\/es\/1031-exchange-timeline\/\" target=\"_blank\" rel=\"noopener\"><strong>45 days from the day of closing<\/strong>,<\/a> the day of closing being the first day, to identify possible Replacement Properties when using a<a href=\"https:\/\/en.wikipedia.org\/wiki\/Internal_Revenue_Code_section_1031\" target=\"_blank\" rel=\"noopener\"> 1031 Exchange<\/a> transaction to defer taxes.<\/p>\n<p>When the time comes to identify those possible Replacement Properties, there are 3 different identification rule options:\u00a0\u00a0 (1)\u00a0<strong>The 3 Property Rule<\/strong>; (2) <strong>The 95% Rule; <\/strong>and (3) <strong>The 200% Rule<\/strong>.<\/p>\n<p>The <strong>Identification Rule that is chosen the most is The 3 Property Rule<\/strong> because it is the easiest and gives exchangers more options.\u00a0There are <strong>NO<\/strong> dollar restrictions when using this Identification Rule.\u00a0 The <strong>Only<\/strong> restriction is that you can only identify up to 3 different properties as possible Replacement Property.<\/p>\n<p>The best way to explain this rule is with an example. \u00a0For this example,\u00a0 I am going to use a recent 1031 exchange that was handled in our office.<\/p>\n<h3>EXAMPLE:\u00a0<\/h3>\n<p>Taxpayers transferred (sold) their Relinquished Property, which was a duplex they had owned for 4 years.\u00a0 They originally had purchased this property for the sum of $229,000.\u00a0 Their purchaser was now paying the sum of $450,000.00, so they had on paper, without any of the standard deductions, a profit of $221,000.\u00a0<\/p>\n<p><strong>For a good dissertation on what deductions are allowable, review our recent post titled<a href=\"https:\/\/www.affiliated1031.com\/es\/what-expenses-are-deductible-in-a-1031-exchange\/\" target=\"_blank\" rel=\"noopener\"> &#8216;What Expenses are Deductible On A 1031 Exchange?\u00bb\u00a0<\/a><\/strong><\/p>\n<p>Affiliated 1031, LLC reminded our clients\/exchangers that they had to purchase one or more Replacement Properties for at least $450,000.00 and use all of the proceeds from the transaction if they did not want to have to pay any taxes to the \u201cTax Man\u201d.\u00a0<\/p>\n<p>They closed on their Relinquished Property transaction and then e-mailed their Identification Statement to us on day 44, even though they had till day 45 to send it to us.\u00a0 Although they didn\u2019t have to identify three properties, in their case, they did.\u00a0 The three properties were: a warehouse for $560,000, a townhouse for $350,000, and a condominium for $209,000.\u00a0<\/p>\n<p>If they purchased the warehouse for $560,000, that of course, would qualify, because the cost was more than the investment property they had relinquished.\u00a0 If they purchased either the townhouse for $350,000 or the condominium for $209,000, they would not have purchased something of equal value or more, and therefore they would have to pay tax on the difference.\u00a0 But the rest of the funds would qualify for a \u201cpartial exchange\u201d.\u00a0<\/p>\n<p>They could also purchase both the townhouse for $350,000 and the condominium for $209,000 for a total of $559,000, which of course is more than the $450,000 that they sold their Relinquished Property for; this would also qualify for a complete tax-deferred exchange.<\/p>\n<p><strong>They had a lot of options and because they used The Three (3) Property Rule, they had a choice of which properties to purchase.<\/strong>\u00a0 I want to repeat that they did have one <strong>limitation; <\/strong>they could only identify up to 3 properties.\u00a0<\/p>\n<p>You can learn more about the Identification rules and how the taxpayer can identify more than 3 properties at our <strong><a href=\"https:\/\/www.affiliated1031.com\/es\/que-es-un-intercambio-de-la-seccion-1031\/\" target=\"_blank\" rel=\"noopener\">website here<\/a><\/strong>.\u00a0 You can also learn more about the\u00a0\u00a0200% Rule and the 95% rule from the examples in this previous post titled <strong><a href=\"https:\/\/www.affiliated1031.com\/es\/everything-you-need-to-know-about-1031-property-identification-2\/\" target=\"_blank\" rel=\"noopener\"><em>Everything You Need to Know About 1031 Exchange Property Identification.<\/em><\/a><\/strong> \u00a0<\/p>\n<p><b>AFFILIATED 1031,<\/b> <b>LLC<\/b><span style=\"font-weight: 400;\"> always recommends that the taxpayer consult their tax and legal counsel on all matters dealing with the Internal Revenue Service, inclouding but not limited to IRS section 1031. <\/span><\/p>\n<p>\u00a0<\/p>\n<p><\/p>\n<p>\u00a0<\/p><\/div><\/div><\/div><\/div><div class = \"tatsu-column-bg-image-wrap\"><div class = \"tatsu-column-bg-image tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-column-overlay tatsu-animate-none\" ><\/div><\/div><style>.tatsu-row > .tatsu-h6ussszzti6lzj0s.tatsu-column{width: 100%;}.tatsu-h6ussszzti6lzj0s.tatsu-column > .tatsu-column-inner > .tatsu-column-overlay{mix-blend-mode: normal;}.tatsu-h6ussszzti6lzj0s > .tatsu-column-inner > .tatsu-top-divider{z-index: 9999;}.tatsu-h6ussszzti6lzj0s > .tatsu-column-inner > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6ussszzti6lzj0s > .tatsu-column-inner > .tatsu-left-divider{z-index: 9999;}.tatsu-h6ussszzti6lzj0s > .tatsu-column-inner > .tatsu-right-divider{z-index: 9999;}<\/style><\/div><\/div><\/div><\/div><div class=\"tatsu-section-background-wrap\"><div class = \"tatsu-section-background tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-section-overlay\"><\/div><style>.tatsu-h6ussszzoc8j0qfs .tatsu-section-pad{padding: 15px 0px 15px 0px;}.tatsu-h6ussszzoc8j0qfs > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6ussszzoc8j0qfs > .tatsu-top-divider{z-index: 9999;}.tatsu-h6ussszzoc8j0qfs .tatsu-section-overlay{mix-blend-mode: normal;}<\/style><\/div><div  class=\"tatsu-hdeup74wuw9tr9e5 tatsu-section  tatsu-bg-overlay   tatsu-clearfix\" data-title=\"\"  data-headerscheme=\"background--dark\"><div class='tatsu-section-pad clearfix' data-padding='{\"d\":\"15px 0px 15px 0px\"}' data-padding-top='15px'><div class=\"tatsu-row-wrap  tatsu-wrap tatsu-row-one-col tatsu-row-has-one-cols tatsu-medium-gutter tatsu-reg-cols  tatsu-clearfix tatsu-hdeup74ww2f19fdh\" ><div  class=\"tatsu-row \" ><div  class=\"tatsu-column  tatsu-bg-overlay tatsu-one-col tatsu-column-image-none tatsu-column-effect-none  tatsu-hdeup74wx0c61dbc\"  data-parallax-speed=\"0\" style=\"\"><div class=\"tatsu-column-inner \" ><div class=\"tatsu-column-pad-wrap\"><div class=\"tatsu-column-pad\" ><div  class=\"tatsu-module tatsu-text-block-wrap tatsu-hdeup74wxwdvt62m  \"><div class=\"tatsu-text-inner tatsu-align-center  clearfix\" ><style>.tatsu-hdeup74wxwdvt62m.tatsu-text-block-wrap .tatsu-text-inner{width: 100%;text-align: left;}<\/style>\n<\/div><\/div><\/div><\/div><div class = \"tatsu-column-bg-image-wrap\"><div class = \"tatsu-column-bg-image tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-column-overlay tatsu-animate-none\" ><\/div><\/div><style>.tatsu-row > .tatsu-hdeup74wx0c61dbc.tatsu-column{width: 100%;}.tatsu-hdeup74wx0c61dbc.tatsu-column > .tatsu-column-inner > .tatsu-column-overlay{mix-blend-mode: normal;}.tatsu-hdeup74wx0c61dbc > .tatsu-column-inner > .tatsu-top-divider{z-index: 9999;}.tatsu-hdeup74wx0c61dbc > .tatsu-column-inner > .tatsu-bottom-divider{z-index: 9999;}.tatsu-hdeup74wx0c61dbc > .tatsu-column-inner > .tatsu-left-divider{z-index: 9999;}.tatsu-hdeup74wx0c61dbc > .tatsu-column-inner > .tatsu-right-divider{z-index: 9999;}<\/style><\/div><\/div><\/div><\/div><div class=\"tatsu-section-background-wrap\"><div class = \"tatsu-section-background tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-section-overlay\"><\/div><style>.tatsu-hdeup74wuw9tr9e5 .tatsu-section-pad{padding: 15px 0px 15px 0px;}.tatsu-hdeup74wuw9tr9e5 > .tatsu-bottom-divider{z-index: 9999;}.tatsu-hdeup74wuw9tr9e5 > .tatsu-top-divider{z-index: 9999;}.tatsu-hdeup74wuw9tr9e5 .tatsu-section-overlay{mix-blend-mode: normal;}<\/style><\/div>","protected":false},"excerpt":{"rendered":"<p>Most of you are aware that the taxpayer\/exchanger has 45 days from the day of closing, the day of closing being the first day, to identify possible Replacement Properties when using a 1031 Exchange transaction to defer taxes.<\/p>\n<div><a href=\"https:\/\/www.affiliated1031.com\/es\/use-the-3-property-rule-to-create-more-options-in-a-1031-exchange\/\" class=\"exp-read-more exp-read-more-underlined\">Read More<\/a><\/div>\n","protected":false},"author":1,"featured_media":26963,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","footnotes":""},"categories":[57],"tags":[],"class_list":["post-27272","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-1031-exchange-basics-es"],"_links":{"self":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27272","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/comments?post=27272"}],"version-history":[{"count":4,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27272\/revisions"}],"predecessor-version":[{"id":27974,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27272\/revisions\/27974"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media\/26963"}],"wp:attachment":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media?parent=27272"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/categories?post=27272"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/tags?post=27272"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}